Correction to This Article
An Oct. 13 Page One article about an allegation that the government withdrew a $100 million contract after Qwest refused to participate in a National Security Agency program incorrectly quoted Kurt Opsahl, senior staff attorney for the Electronic Frontier Foundation. He did not say: "It's inappropriate for the government to be awarding a contract conditioned upon an agreement to an illegal program. That truly is what's going on here." What he said was: "It's inappropriate for the government to be awarding a contract conditioned upon an agreement to an illegal program, if that's truly what's going on here."

Former CEO Says U.S. Punished Phone Firm

A former Qwest Communications International executive, appealing a conviction for insider trading, has alleged that the government withdrew opportunities for contracts worth hundreds of millions of dollars after Qwest refused to participate in an unidentified National Security Agency program that the company thought might be illegal.

Former chief executive Joseph P. Nacchio, convicted in April of 19 counts of insider trading, said the NSA approached Qwest more than six months before the Sept. 11, 2001, attacks, according to court documents unsealed in Denver this week.

Details about the alleged NSA program have been redacted from the documents, but Nacchio's lawyer said last year that the NSA had approached the company about participating in a warrantless surveillance program to gather information about Americans' phone records.

In the court filings disclosed this week, Nacchio suggests that Qwest's refusal to take part in that program led the government to cancel a separate, lucrative contract with the NSA in retribution. He is using the allegation to try to show why his stock sale should not have been considered improper.

Nacchio was convicted for selling shares of Qwest stock in early 2001, just before financial problems caused the company's share price to tumble. He has claimed in court papers that he had been optimistic that Qwest would overcome weak sales because of the expected top-secret contract with the government. Nacchio said he was forbidden to mention the specifics during the trial because of secrecy restrictions, but the judge ruled that the issue was irrelevant to the charges against him.

Nacchio's account, which places the NSA proposal at a meeting on Feb. 27, 2001, suggests that the Bush administration was seeking to enlist telecommunications firms in programs without court oversight before the terrorist attacks on New York and the Pentagon. The Sept. 11 attacks have been cited by the government as the main impetus for its warrantless surveillance efforts.

The allegations could affect the debate on Capitol Hill over whether telecoms sued for disclosing customers' phone records and other data to the government after the Sept. 11 attacks should be given legal immunity, even if they did not have court authorization to do so.

Spokesmen for the Justice Department, the NSA, the White House and the director of national intelligence declined to comment, citing the ongoing legal case against Nacchio and the classified nature of the NSA's activities. Federal filings in the appeal have not yet been disclosed.

In May 2006, USA Today reported that the NSA had been secretly collecting the phone-call records of tens of millions of Americans, using data provided by major telecom firms. Qwest, it reported, declined to participate because of fears that the program lacked legal standing.

In a statement released after the story was published, Nacchio attorney Herbert Stern said that in fall 2001, Qwest was approached to give the government access to the private phone records of Qwest customers. At the time, Nacchio was chairman of the president's National Security Telecommunications Advisory Committee.

"Mr. Nacchio made inquiry as to whether a warrant or other legal process had been secured in support of that request," Stern said. "When he learned that no such authority had been granted and that there was a disinclination on the part of the authorities to use any legal process, including the Special Court which had been established to handle such matters, Mr. Nacchio concluded that these requests violated the privacy requirements of the Telecommunications Act."

Stern could not be reached for comment yesterday. Another lawyer for Nacchio, Jeffrey Speiser, declined to comment on whether the call-records program was the program discussed at the February 2001 meeting.